In a recent speech, Treasury Secretary Janet Yellen spoke out in defense of the Internal Revenue Service (IRS) in the face of ongoing threats to cut the agency’s funding by Republicans. Yellen emphasized that playing politics with IRS funding is unacceptable and that any reduction in funding would be damaging and irresponsible.
The funding allocated to the IRS has become a source of political controversy. Last year, the Democrats’ Inflation Reduction Act granted the agency an influx of $80 billion with the intention of cracking down on tax cheats and improving taxpayer service.
However, House Republicans recently voted to rescind $14.3 billion from the IRS to allocate emergency aid for Israel. It is unlikely that this bill will be brought up for a vote in the Democrat-controlled Senate. House Speaker Mike Johnson argues that the IRS cuts would offset spending for Israel, but independent budget experts counter this claim. They argue that diverting money away from the IRS’ enforcement actions would actually increase the deficit. In fact, the nonpartisan Congressional Budget Office predicts that cutting $14.3 billion from the IRS would result in a $26.8 billion reduction in tax revenue over the next decade.
Since gaining control of the House earlier this year, the House GOP has made several attempts to withdraw IRS funds. Some representatives have even called for the complete abolition of the IRS. Many Republicans argue that the IRS will use the money to target middle-class taxpayers and small business owners. However, the Biden administration has reassured taxpayers earning less than $400,000 a year that they will not face increased taxes as a result of the new funding.
Meanwhile, the Biden administration is keen to showcase how the new funding is improving IRS services and enforcement efforts. IRS Commissioner Danny Werfel stated that the agency has experienced a wave of improvements not seen in a generation. By hiring 5,000 new customer service representatives, the IRS was able to answer 3 million more calls and reduce phone wait times to just three minutes compared to the previous year. Additionally, increased enforcement efforts on millionaires have resulted in the collection of $160 million in back taxes.
Furthermore, the IRS has already fulfilled its goal of allowing taxpayers to respond to all IRS correspondence online, eliminating the need for certain forms to be sent via mail. This change is estimated to benefit over 94% of individual taxpayers. The IRS also has plans to digitize all paper-filed tax returns by 2025, which will significantly reduce processing times and expedite refunds.
Looking ahead, the IRS anticipates rolling out further improvements next year. For instance, the online tool “Where’s My Refund?” will provide taxpayers with more detailed information about the status of their refund, including whether the IRS requires additional information. The agency also plans to increase in-person tax filing support at Taxpayer Assistance Centers, with the goal of providing free tax preparation help to an additional 50,000 taxpayers in the upcoming filing season.
To reduce wait times, the IRS has implemented a call-back option for its main phone line when the expected wait time exceeds 15 minutes. Additionally, the agency is developing its own free tax filing program, known as Direct File, which will launch as a limited pilot program in 13 states next year.
As the debate over IRS funding continues, it is clear that the agency plays a vital role in ensuring fair tax collection and efficient taxpayer service. The new funding aims to strengthen these efforts and improve the overall experience for taxpayers.